Let’s Judge Patent Rights by Harm to the Public — Not to Inventors

Infringement of software patents is usually a good thing because in most cases the alternative to infringing is to produce nothing new. So, what if we could fix the patent problem by rethinking the assumption that infringement should always be penalized?

Instead of basing remedies for infringement entirely on harm to the patentee, we could decide to award remedies only if the infringement also harms the public. That way, if the defendant’s infringement makes the public better off – as it routinely does in software – the court would deny the patentee both money damages and injunctive relief.

But how do we know whether the infringement makes the public better off? Well, when all three of the below three conditions are met:

Samson Vermont

Samson Vermont teaches IP and tort law at the Charlotte School of Law (and previously at the University of Miami and George Mason schools of law). Before that, Vermont practiced patent law in the Washington, D.C. office of Hunton & Williams, where he specialized in biotech and chemical patents. Vermont received his J.D. from the University of Georgia, LLM from the University of Virginia, and served as the Humphrey Fellow in Law & Economics at the University of Michigan.

The patent is under-used. This condition is met if the patentee (or its licensee) does not practice the invention or did not start practicing it until well after the infringer had started. This way, we can isolate cases in which the infringer put the invention to more productive use than the patentee did.

The invention was independently created. This condition is met if the infringer did not in any way copy the invention from the patentee (or from anyone else) — in other words, the infringer’s ability to supply the invention to the public isn’t attributable to free riding. When it is attributable to free riding, however, we would penalize the infringer — that way, we can protect the incentives of whomever the infringer copied from and other future inventors.

Patent notice failed. This condition is met if it was impossible for the infringer to find the patentee’s invention — or if it would have cost the infringer more to find and assess the patentee’s invention in advance than to invent it independently. But wouldn’t going easy on independent inventors actually encourage them to wastefully duplicate patentee R&D? No, because this condition isolates cases in which duplicating the patentee’s R&D is cheaper than searching for the patentee’s invention. In such cases, the costs of duplicating are lower than the costs of the alternative to duplicating, so duplicating doesn’t count as wasteful.

Importantly, this reform can be implemented with or without legislation.

To implement the proposed solution without legislation, courts can simply deny the patentee a remedy when the three conditions are met. Courts can deny injunctive relief under the traditional multi-factor test, with more emphasis on the public interest factor.

If the infringement makes the public better off, wouldn’t it be reasonable for a court to conclude that adequate damages are zero?

And it’s possible for courts to deny money damages because the relevant provision of the Patent Act (35 U.S.C. 284) leaves room for interpretation, directing them courts to award a patentee “damages adequate to compensate for the infringement.” Everyone assumes this means that courts must put the patentee in as good a position as she would have been had there been no infringement, that is, to undo the harm to the patentee. But the language of the provision does not actually say that harm to the patentee is the only relevant variable.

If the infringement makes the public better off, wouldn’t it be reasonable for a court to conclude that there should be no compensation or that adequate damages are zero?

The provision also goes onto to say that damages shall “in no event [be] less than a reasonable royalty for the use made of the invention by the infringer.” Everyone assumes this means the patentee is entitled to at least the license fees she would have earned had the infringer taken a license early on.

However, “reasonable” can be interpreted as meaning reasonable from a social standpoint, as it frequently is in other areas of the law. And if the defendant’s infringement makes the public better off, zero would seem to be the royalty that is reasonable from a social standpoint.

The assumption that patent infringement should always be penalized made more sense in the old days. Not coincidentally, back then it was rare for all three conditions to be met: Patent notice was better; there were fewer non-practicing entities, and the infringer was less likely to be an independent inventor.

Today, there’s a looser link between patenting inventions and the public’s enjoyment of them. Since only the latter counts in the end, we should look for ways to tighten up that link, including simply denying a remedy to a patentee whenever the three conditions are met. After all, isn’t innovation about benefiting society?

Editor’s Note: Given the enormous influence of patents on technology and business — and complexity of the issues involved — Wired has been running a special series of expert opinions on “the patent fix“. To help move reform efforts forward, some of these proposals also advocate specific Solutions to the Software Patent Problem (as part of a conference hosted by the Santa Clara University High Tech Law Institute).